Rwanda: How IMF Debt Service Relief to Rwanda Will Boost Economic Recovery

The severe drop in Africa's import and export trade as a result of the global COVID-19 pandemic is a major contributor to the continent's projected economic decline.

Rwanda has a six-month debt service relief from its International Monetary Fund (IMF) obligations which will allow up to $11M liquidity.

The International Monetary Fund has paused collection of debts from a number of countries including Rwanda as part of its revamped Catastrophe Containment and Relief Trust(CCRT)to help address the impact of the COVID-19 pandemic.

By not servicing its debt obligation for several months,Rwanda will have more capital available to invest in affected aspects of the economy as well as improve capacity to respond to the pandemic.

The Catastrophe Containment and Relief Trust is in position to provide about US$500 million in grant-based debt service relief for the 25 countries.

Samba Mbaye the IMF Rwanda Resident Representative told The New Times that there is a possibility that the period could be further extended depending on their success on mobilizing funds to extend the debtrelief further.

"Rwanda will receive about$11 million in debt service relief on its IMF obligations for an initial period of 6 month.The IMF will continue its fundraising efforts and will provide further debt service relief for a period up to 24 months depending on resource availability,"he said.

Among the aspects that the funds could be channeled into is an affordable capital scheme through a special fund that is currently being developed by the Ministry of Finance and other stakeholders.

The fund under development will come in handy to enable access to capital for business operators especially Small and Medium Enterprises who will need to revamp their operations or start over,the Finance Ministry recently told The New Times.

Among the sectors that have been most affected in tourism,hospitality and trade sectors.

Experts say that the debt relief will go a long way in enabling the government have liquidity considering that much expenses were incurred in curbing the virus and some of the taxes receipts and income foregone.

Kristalina Georgieva,Managing Director of the International Monetary Fund(IMF)said that they are working with well-off countries to replenish the resources and boost further their ability to provide additional debt service relief for a full two years.

The IMF in March approved$109.4 million credit to Rwanda.

The emergency assistance is drawn under the Rapid Credit Facility(RCF),which provides rapid concessional financial assistance with limited conditionality to low-income countries.

The fund is budget support that will be utilized in aspects that the government deems necessary and of priority.

Other interventions that have been rolled out by the government to facilitate recovery include such as fiscal interventions by the Central Bank to increase banks'liquidity will go a long way to support recovery.

As a result of the Central Bank's fiscal intervention to increase liquidity among lenders, local banks have said that they will be lenient to their clients on loan repayment.

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